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    Definition of Bullion

    Physical gold which is highly pure with a purity percentage of about 95 to 99 % is called bullion. This bullion is extracted from the gold ore which is taken from the mine. The gold is extracted from the gold ore with the help of some chemicals; this gold is called parted bullion or unparted bullion if the gold is mixed with more than one metal.

    Bullion is in the form of bars or ingots and is stored by the government or central banks as an asset. This bullion can be bought or sold by investors through global bullion markets. They can also invest in bullion through Exchange Traded Funds or ETFs.

    About 20% of the bullion is held as reserves by the central banks and these reserves are used to settle any international debts or economical and financial matters of the country. The central banks lend these bullions to bullion banks at a rate of 1 % .

    How do you invest in bullion?

    There are a number of ways in which you can purchase and invest in bullion. The three most popular ways of investment are— buy bullion in physical form, invest through exchange traded funds or ETFs and invest through future contracts.

    Physical Form

    If you choose to buy gold or silver in a physical form, you can do that by buying bullions. This may be in the form of bars, ingots or coins. You can keep this bullion in a safe deposit at a bank.

    Exchange Traded Funds or ETFs

    You can invest in gold through Exchange Traded Funds or ETFs in the bullion market. When you invest in ETFs the asset is not physical gold but gold on paper that is gold certificates. Although it is not the same as owning physical gold, investing in ETFs also provides a good deal of benefits to the investor.

    Futures Contract

    You can also buy bullion futures contracts as a way of investment. This contract is an agreement with a set date and set price at which the bullion is to be bought or sold.

    As with any other investment, bullion prices also fluctuate and there is a certain amount of risk involved.

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